When President Biden seemingly slammed the door shut on U.S. Steel’s proposed merger with Nippon Steel Corporation just weeks before leaving office, one could be forgiven to think the deal was dead.
After all, President Trump had taken the same position while campaigning last year in Pennsylvania, trying hard to win over the steel labor unions which vehemently opposed foreign ownership. And in case people missed it, his running mate had something to say about the plight of America’s steel industry in his memoir, Hillbilly Elegy.
But not long after taking office, President Trump’s position softened and he appeared open to continued negotiations in an effort to save a legendary, albeit fading, U.S. company.
Last month, the Trump White House ordered the Committee on Foreign Investment in the United States (CFIUS) to conduct a de novo review, after it couldn’t come to a consensus in the waning weeks of the Biden administration.
And just this month Nippon Steel’s vice chairman was in Washington to meet with Trump officials about an amended agreement. President Trump’s renewed interest in getting a deal is already paying dividends as Nippon Steel is now reportedly planning $14 billion to invest directly into U.S. Steel’s operations which includes $4 billion for a brand new steel mill.
At issue is whether the Japanese company can heavily invest in a storied American counterpart, or own it outright as a subsidiary.
Even though U.S. Steel was once the world’s wealthiest corporation, the first to reach $1 billion, those golden days a century ago are long gone. Now its global steel rankings are somewhere in the mid-20s. That is not a dig at U.S. Steel, it’s regrettably the result of global market forces and “free trade” with less wealthy countries which have decimated American factories across the country. It’s a common problem that caused the “rust belt” in the first place.
Meanwhile, Cleveland-Cliffs, a domestic competitor based in Ohio and only slightly higher ranked than U.S. Steel, offered a hostile takeover bid in Summer 2023 for a relatively low price of $7.3 billion.
Enter Nippon Steel, the world’s No. 4 steel producer, offering more than double when factoring in assumption of debt, a whopping $14.9 billion total price tag. U.S. Steel jumped at the chance, and both companies’ board of directors unanimously approved the deal.
With Nippon’s offer came the promises of billions in investment for U.S. Steel manufacturing modernization here in the U.S. It’s where we stand today.
President Trump has strongly backed foreign investment in America and says so at every opportunity. The open question now is if he’s willing to allow U.S. Steel’s leadership based in Pittsburgh to accept such infrastructure improvements on their terms – or not?
Considering that he ordered a new CFIUS review last month and Nippon Steel officials keep coming back to the U.S. to meet with Trump officials, I’d say the probability of a merger is pretty high. The deal is still alive and well.
My view is if the president can save a once-upon-a-time American industrial giant from its current slide and eventual road to bankruptcy, that’s a pretty persuasive argument. After all, U.S. Steel can’t be “great again” if it no longer exists.
Of course the elephant in the room is China, which thanks to decades of unfair trade practices has come to dominate world steel production with six of ten top global companies, including the No. 1 China Baowu Group.
Even though President Trump has tried mightily to bring China to heel on tariffs, even more aggressively than he did during his first term in office, he hasn’t gotten much help from Wall Street, let alone Democrat politicians and legacy media.
One way he can confront China’s domination in global steel markets without the support of his domestic detractors is allowing the merger to proceed so at least the U.S. and Japan can join forces in a key industrial sector.
While the merger remains in negotiations, it certainly appears to be headed in a positive direction for U.S. Steel and American steelworkers.
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